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Move over banks, mutuals offer borrowers better deals

Research by Moneyfacts suggests that Building Societies offer better mortgage rates than banks. 

Due to bigger banks taking greater advantage of the Government’s Funding for Lending Scheme to fund their mortgage books (and still having a significant sum of cash left to use), many would assume that mortgage rates from these providers would be significantly lower than those offered by the rest of the market.

However, research from has found that building societies are actually the ahead when it comes to mortgage deals.
  Banks Building Societies Difference
Two-Year Fixed Rate 95% LTV Average 4.26% 4.00% 0.26%
Two-Year Fixed Rate 75% LTV Average 2.42% 1.98% 0.44%
Two-Year Fixed Rate 60% LTV Average 2.05% 1.91% 0.14%
  Banks Building Societies Difference
Five-Year Fixed Rate 95% LTV Average 4.78% 4.28% 0.50%
Five-Year Fixed Rate 75% LTV Average 2.89% 2.63% 0.26%
Five-Year Fixed Rate 60% LTV Average 2.64% 2.35% 0.29%
Source:   Compiled: 21.6.16
Charlotte Nelson, Finance Expert at, said:
“Building societies currently dominate the Best Buy tables and are beating the banks hands-down in the mortgage rate war, which is disappointing considering the amount of Government help bigger banks have received. Despite all the money released by the Funding for Lending Scheme, banks are still failing to compete on cost. For example, borrowers opting for the average two-year fixed rate at 75% loan-to-value (LTV) would be £521.28* worse off in terms of repayments in the first year if they opted for a bank deal instead of a mortgage from a building society.
“Building societies are making their mark on the mortgage market by offering the lowest deals. Moreover, this dominance is not restricted to lower LTVs - building societies shine at higher LTVs as well. In fact, the average five-year fixed rate at 95% LTV provided by building societies is a massive 0.50% lower than that offered by banks.
“Mutuals are designed to put customers first and aim to provide better deals for their customers. This is reflected by the fact that borrowers are being offered much lower rates by building societies compared to their banking rivals. They can also have a much more personal approach in terms of lending criteria.
“The gap between the banks and building societies suggests that now is the time for borrowers to look away from the big banks and consider smaller mutuals for a more competitive and cost-effective deal.”
*Repayment based on a £200,000 loan over 25 years.

Posted by Rachel Springall on 21 June 2016